The news
On July 9, 2026, S&P Global Ratings lowered its Oracle credit rating to BBB- from BBB, the lowest investment-grade level and one notch above junk. The agency set a stable outlook on Oracle (ORCL) with the downgrade and pointed to debt-funded AI data centers and reliance on OpenAI. According to heise online, S&P had put Oracle on a negative outlook in July 2025.
S&P also lowered Oracle's short-term rating to A-3 from A-2, according to MLQ News. A BBB- rating keeps Oracle's debt in investment grade, but with the thinnest cushion the category allows. S&P's own report was not publicly accessible, so this account relies on outlets that reported on it.
The main concern was spending. According to heise online's account of the S&P analysis, the agency now expects Oracle to spend $90 billion to $95 billion on capital projects in fiscal 2027, up from a previous forecast of $60 billion. S&P projects free operating cash flow, the cash left after running the business and paying for those projects, at a deficit of about $42 billion, compared with an earlier projection of about $24 billion, MLQ reported.
Oracle was already burning cash before the downgrade. Its own figures show fiscal 2026, which ended May 31, 2026, closed with $55.7 billion of capital expenditures and negative free cash flow of $23.7 billion.
S&P's second concern was concentration. The agency estimated that about half of Oracle's $638 billion in remaining performance obligations, or contracted revenue not yet recognized, is tied to OpenAI. Heise reported that S&P called OpenAI a central credit risk, because OpenAI's ability to pay depends on a lasting AI boom, models that stay ahead and continued access to outside capital. MLQ quoted S&P as flagging "extreme customer concentration risk."
MLQ also reported that Oracle had sold $5 billion of mandatory convertible preferred stock in February 2026 and planned $20 billion of additional equity during 2026. We found no public response from Oracle to the rating action.
The numbers
- New S&P long-term rating
- BBB- (from BBB), stable outlook
- S&P fiscal 2027 capex forecast
- $90B to $95B (was $60B)
- S&P projected fiscal 2027 free operating cash flow
- About -$42B
- Remaining performance obligations at the time
- $638B, about half tied to OpenAI (S&P estimate)
- Oracle fiscal 2026 free cash flow
- -$23.7B
Why CEOs should care
For buyers of Oracle Cloud Infrastructure (OCI), the rating cut does not change a contract, but it does change the risk profile of the supplier behind a multi-year commitment. Customers signing or renewing large capacity deals should ask Oracle for firm delivery dates by region, service credits that bite if capacity slips, and clear exit rights. It is also fair to ask how Oracle prioritizes capacity when one customer accounts for so much of its backlog.
CFOs and treasurers have two exposures to check. The first is counterparty risk: any prepayments or minimum-spend commitments to Oracle are now owed by a BBB- credit, so finance teams should confirm how those are protected. The second is investments: if a company holds Oracle bonds, check whether its investment policy allows BBB- paper and what a further one-notch cut to speculative grade would force it to do.
Boards should read this as a case study in customer concentration, a risk S&P judged serious enough to act on despite a $638 billion backlog. Directors can ask management the same question about their own business and their key vendors: how much of a supplier's future depends on one customer whose ability to pay depends on raising outside capital, and what the plan is if that customer pulls back.
The bigger picture
Oracle's AI buildout has made it one of the largest corporate borrowers in the US bond market. The Next Web, citing Bloomberg data, reported that Oracle was the second-largest non-financial issuer in the Bloomberg US Corporate Bond Index after Amazon, with $117 billion outstanding, and that its 10-year bonds yielded roughly 6.5%. S&P's reasoning weighed the $638 billion backlog against the capital spending and cash-flow deficit needed to deliver it. In our reading, a signed contract only turns into revenue once the data centers are built and powered.
What happened next
On July 20, Oracle shares fell as much as 4% to a one-year low and were down 2.94% at $122.69 at the time of TradingKey's report. On September 10, Oracle reported fiscal first-quarter results showing remaining performance obligations of $664 billion, up $209 billion from a year earlier, after it booked more than $30 billion of additional AI cloud contracts in the quarter.
The same release showed $28.5 billion of capital expenditures and negative free cash flow of $5.4 billion for the quarter, and said Oracle sold $20 billion of common stock through an at-the-market program, in which shares are sold gradually into the market. Readers should watch Oracle's next quarterly report for capex, cash burn and any shift in the share of backlog tied to OpenAI, and for any change in S&P's stable outlook.
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